The automotive sector and major auto parts manufacturers are expected to recover some ground after a tough 2020. While disruption linked to the pandemic remains a matter of uncertainty, the auto industry megatrends will continue to affect leading parts manufacturers. ZF Friedrichshafen’s credit metrics may benefit from improving fundamentals in the sector and the ensuing cash flow generation. Moreover, the company is fully involved in the “Next Generation Mobility” strategy.
We like the issuer, which could be a potential candidate for an investment grade rating over the next few years.